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MENA venture capital activity rises as countries look to small businesses for growth

Venture capital activity in the Middle East and North Africa increased by 28 per cent in 2011, according to the Second Annual Venture Capital in MENA Report released by the MENA Private Equity Association.

While the region’s VC industry is still in the early phases of development, the rise in activity reflects increased optimism for small business growth amongst entrepreneurs, investors and governments, despite macro-level challenges that persist in some countries.

From 2009 to 2011, 120 VC transactions were completed compared to just 62 from 2006 to 2008. In 2011, 46 deals were completed, up from 36 in 2010.

Morocco claimed the majority of deals since 2006 with 57 per cent followed by Egypt and Lebanon both with nine per cent.

The IT and software sector continued to lead deal-making, capturing 46 per cent of transactions since 2006.

"The venture capital industry has seen positive progress in the last 12 months," says Ghazi Ben Othman (pictured), head of asset management for Malaz Capital and a member of the MENA Private Equity Association VC Taskforce. "We are encouraged to see more interest from investors, much more entrepreneurial activity and many private and public initiatives to support budding entrepreneurs. The region has also seen successful exits and increasing interest from international investors over the last year."

International and local investors are increasingly focused on opportunities for small business creation and innovation arising in the wake of the Arab Spring.

Tarek Kabrit, principal at Abraaj Capital and member of the VC Taskforce, says: "Although small in size, innovative, high-growth companies are disproportionately important for economic growth. Governments and stakeholders are beginning to realize more and more that the future prosperity of the region depends on our ability to support these businesses."

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